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State approves Midnight Sun participating area at Prudhoe Bay Participating area to include 3,113 acres; 762 acres added to unit in fifth expansion, bringing total to 245,677 acres Kristen Nelson PNA News Editor
The state has approved a request by Prudhoe Bay unit operators ARCO Alaska Inc. and BP Exploration (Alaska) Inc. to expand the Prudhoe Bay unit and form the Midnight Sun participating area within the expanded unit. The application was filed July 1. The Department of Natural Resources Division of Oil and Gas issued a finding and decision of the commissioner March 10.
The Midnight Sun participating area surrounds two wells drilled and completed by ARCO in the Kuparuk geologic formation during the 1997-98 and 1998-99 drilling seasons.
The 3,113 acre participating area includes portions of three leases: ADL 28277 (tract 25), ADL 28299 (tract 26) and ADL 28300 (tract 27). BP Exploration (Alaska) owns 100 percent working interest in tract 25; ARCO and Exxon Corp. each own 50 percent working interest in tracts 26 and 27. All three leases were acquired in state lease sale 14 held July 14, 1965, and have 12.5 percent royalties. ADL 28277 and ADL 28299 were partially within the Prudhoe Bay unit and the approximately 762 additional acres from those two leases have been added to the unit area.
1998 dual discovery ARCO said in 1998 that the Midnight Sun was one of two intervals discovered in a single well, the 1 Sambuca. The Kuparuk interval, the Midnight Sun field, tested approximately 4,000 barrels per day of 29 API gravity oil and 1.5 million standard cubic feet of gas per day.
The shallower Sag/Ivishak interval, the Sambuca field, tested 1,400 barrels per day of 24 API gravity oil and 490,000 standard cubic feet of gas per day. The discovery well was located on an ARCO-Exxon lease.
A long-term production test of Midnight Sun began in the fall of 1998, with production of approximately 2,000 barrels per day and 750,000 cubic feet of gas per day from the initial discovery well.
ARCO said in 1998 that the Midnight Sun was the first oil and gas accumulation in and around Prudhoe Bay to begin production under terms of a recent facility-sharing agreement among the Prudhoe Bay owners.
Field costs agreement reached Based on the working interest owners’ initial assessment of original oil in place at Midnight Sun, ARCO and Exxon each own 48.625 percent of the production from the participating area; BP Exploration (Alaska) owns the remaining 2.75 percent.
The state said that planned Midnight Sun reservoir development will use existing Prudhoe Bay unit infrastructure of pipelines, roads, pads and processing facilities, with initial development from Prudhoe Bay Pad E using existing production gathering lines from that pad to Gathering Center No. 1.
The Division of Oil and Gas said it was concerned that expanding the Prudhoe Bay unit “could subject the state’s royalty share of production from the Midnight Sun reservoir to a deduction for field costs under the 1980 Prudhoe Bay Royalty Settlement Agreement.” That agreement allows working interest owners to deduct field costs from their royalty payments to the state at a rate of 87 cents per barrel for every barrel of in-kind and in-value royalty oil taken from the Prudhoe Bay unit.
“If the 1980 Agreement was made applicable to the proposed (Midnight Sun participating area) or the state otherwise agreed to allow the field cost deductions, the state would bear a significant cost,” the division said in the commissioner’s decision.
The third expansion of the Prudhoe Bay unit in 1993 and the resulting formation of the Point McIntyre participating area resulted in litigation, still under way, between the state and Exxon over whether Exxon has the right to deduct field costs. To resolve the field cost issue, the state said it came to an agreement with the Midnight Sun working interest owners that field costs could be deducted from leases currently within the Prudhoe Bay unit — including areas known as the Midnight Sun participating area slivers (section 36 of tract 25; sections 29, 31 and 32 of tract 26; and section 28 of tract 27).
“Further,” the state said, “the Midnight Sun working interest owners propose, and the division agrees, that the 1980 agreement applies to production attributable to Section 25 of Tract 25 and Section 30 of Tract 26, which are currently outside the PBU, subject to disallowance of any field cost deduction taken for production allocated to these two sections if the state ultimately prevails in litigation of the field cost dispute between Exxon and the DNR currently being pursued…” over Point McIntyre field cost deductions. That case is pending in the Alaska Supreme Court.
If the state prevails in the pending Point McIntyre litigation, field cost deductions will be disallowed for section not included within the original Prudhoe Bay unit boundaries.
Two wells drilled The Midnight Sun reservoir is located just north of E-Pad in the Prudhoe Bay unit. Two wells have been drilled in the field: the 1 Sambuca (PBU E-100) and the Midnight Sun well (PBU E-101). Depending on reservoir performance, the state said, the two wells already drilled may be the only wells that will produce the Midnight Sun reservoir. Measured depth on the 1 Sambuca was 13,282 feet; true vertical depth was 9,423 feet. The 100-foot vertical section of oil and gas-bearing rock found in the Kuparuk formation was at a measured depth of 11,622 feet; the 160-foot vertical section of Sag/Ivishak was at a measured depth of 12,965 feet. ARCO has said that the estimated recoverable reserves from the combined reservoirs is in the 30-50 million barrel range.
Midnight Sun pilot test production began Oct. 2, 1998, the state said, and in that month the PBU E-100 well produced 58,197 barrels of oil, 644 barrels of water and 137,748 MCF of gas. Over the next three months, oil production declined and gas production increased. In December 1998, the PBU E-100 well produced 40,085 barrels of oil, 366 barrels of water and 202,324 MCF of gas.
In the three months before the well was shut in at the end of December 1998, it produced a total of 147,556 barrels of oil, 1,054 barrels of water and 521,834 MCF of gas. The well flowed for 17 days in March 1999, producing 26,517 barrels of oil, 66 barrels of water and 104,014 MCF of gas. The PBU E-100 has been shut in since and is currently being used as a pressure monitoring well.
The PBU E-101 well was placed in production in November 1999 and cumulative production through 1999 is 1,903,563 barrels of oil, 3,516 barrels of water and 3,858,738 MCF of gas. Currently the only production from Midnight Sun is from the PBU E-101 well.
The state said the Midnight Sun owners are evaluating the need for additional wells or sidetracks, and are contemplating an additional upstructure production well, PBU E-102. A waterflood program is planned by the third quarter of 2000, with PBU E-100 converted to water injection.
A Midnight Sun pool rules hearing is scheduled at the Alaska Oil and Gas Conservation Commission April 4 at 9 a.m.
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